Absa Bank projects further CBR cut to 9.0 per cent

Absa Bank projects further cuts in the ="https://www.standardmedia.co.ke/health/index.php/financial-standard/article/2001513060/experts-firms-to-miss-out-on-cheap-loans-on-states-appetite-for-domestic-debt">Central Bank Rate< (CBR) by the regulator from the current 10.75 per cent to 9.0 per cent.

Postulations on the country’s macroeconomics this year provided by Absa Bank Senior Economist Phumelele Mbiyo also show that inflation will settle at 4.5 per cent while the economy will expand by 4.9 per cent.

Inflation currently stands at 3.5 per cent according to Kenya National Bureau of Statistics (KNBS) February figures. The hypothesis is that upward pressure from food prices is expected to ease as the impact of light La Nina eases off after quarter one

The 4.9 per cent growth in gross domestic product (GDP) will be facilitated by agriculture, construction and financial services.

“The contribution of agriculture to Kenya’s GDP growth has been falling over the last year and is expected to take a hit from the La Nina phenomena. The weather phenomena is characterised as weak and its impact on food prices may peak in the first quarter this year when it is projected to be at its most intense,” he Mr Mbiyo.

He noted that the construction sector, which had stagnated after a peak in 2022, has shown recovery in the last few months.

On the financial services sector, which had taken a hit when the Central Bank of Kenya raised the CBR, is expected to grow as the rates come down. He said now that the monetary policy has shifted after ="https://www.standardmedia.co.ke/article/2001513506/falling-prices-mbadi-s-math-doesn-t-add-up">CBK cut rates< consistently since August last year, it signals lower borrowing costs and recovery in the private sector credit.

“The Central Bank of Kenya is expected to cut the Central Bank Rate down to 9.0 per cent by the third quarter of the year and leave it unchanged for the remainder of this year. This is expected to lower the cost of borrowing and boost private sector credit expenditure,” he said during the 2025 weeklong Economic forum hosted by Absa as detailed in a statement.

He said the Kenya shilling is expected to remain stable, backed by international financial inflows that have boosted foreign exchange reserves to near-record levels.

“Kenya’s comfortable forex reserves and access to international financing, including foreign portfolio inflows to the local bond market, multilateral loans from the World Bank and International Monetary Fund, bilateral loans, and the Eurobond market continue to ward off volatility and have bolstered investor confidence,” he added.

The sessions were attended by bank analysts, financial institutions (both banking and non-banking ones), importers, exporters, regulators and market investors who had an opportunity to unpack complex financial instruments that can be crucial in navigating current volatility, while exploring alternative funding opportunities as well yield enhancement instruments as we enter a low-interest rate environment.

“We are committed to the growth of this continent and the prosperity of our people, and we believe that bringing these kinds of insights is our contribution to the reforms and policy discussions that need to take place in our continent,” said Absa Bank Kenya PLC Chief Executive & Managing Director Abdi Mohamed.